Thoughts and comments relating to patent post grant challenges

This week, the Supreme Court granted Oil States Energy Service, LLC’s Petition for Cert, challenging the constitutionality of the IPRs. The primary question presented in Oil States’ petition was whether the IPR “violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.” If the Supreme Court were to find IPRs unconstitutional, it would upend the AIA-based reviews (IPR, CBM, and PGR), and likely also ex parte and inter partes reexaminations. Elimination of IPRs would take away one of patent litigation defendants’ strongest tools for leveling the playing field against plaintiffs, and call into question the status of a multitude of patents found to be invalid.

New patent litigation filings have been decreasing. The decrease is likely attributable to many factors, including Alice challenges and TC Heartland’s venue clarification. But IPR petitioners’ success rates must be a consideration of any would-be patent plaintiff. By agreeing to hear this appeal, the Supreme Court will give patent owners a ray of hope that a proceeding that has been used to invalidate an unprecedented number of patents could be coming to an end.

Assignor estoppel is an equitable remedy that prohibits a patent assignor, or one in privity with an assignor, from later challenging the validity of an assigned patent. See, e.g., Mag Aerospace Industries, Inc. v. B/E Aerospace, Inc. (Fed. Cir. 2016). Courts have reasoned that an assignor should not be permitted to sell a patent and later assert that it is worthless, all to the detriment of the assignee. The AIA, however, provides that “a person who is not the owner of a patentmay file with the Office a petition to institute an inter partes review of the patent.” 35 U.S.C. § 311(a). The Board has interpreted the statute as allowing an assignor of a patent, who is not an owner of the patent at the time of filing, to file a petition requesting inter partes review. The Board has explained that “Congress has demonstrated that it will provide expressly for the application of equitable defenses when it so desires.” Redline Detection, LLC v. StarEnvirotech, Inc., Case IPR2013-00106, Paper 40 at 4 (PTAB Oct. 1, 2013) (citation omitted).

In Arista v. Cisco, Cisco argued that the Board’s rejection of the assignor estoppel defense works an injustice by allowing a prior assignor an end run around the assignor estoppel doctrine. The Board considered Cisco’s arguments for application of assignor estoppel, and noted that it is “cognizant of the specter of forum shopping,” but declined to apply the equitable defense to the IPR proceeding because Congress had not expressly provided for the application of equitable defenses.

Litigation defendants often file IPRs to benefit from the technical expertise of the Board, lower evidentiary burden, and potentially broader claim construction. The Board’s recent decision exemplifies that, at least for now, petitioners may also invalidate a patent in an IPR when they would be estopped from doing so in litigation.

On May 22, the U.S. Supreme Court granted SAS Institute’s Petition for Cert seeking review of the Board’s practice of instituting review of some challenged claims but not others. In the Federal Circuit’s decision on appeal, Judge Newman offered her dissent, opining that “partial review cannot be inferred from the statute or accommodated to its purpose.” Federal Circuit later denied SAS’s petition for en banc review without opinion. Judge Newman again dissented, opining that “[t]he practice, called ‘partial’ or ‘selective’ institution, leaves the unselected claims dangling lacking both finality and estoppel, preventing the expediency and economy and efficiency that motivated the America Invents Act.”

SAS presented the following question in its petition:

Does 35 U.S.C. § 318(a), which provides that the Patent Trial and Appeal Board in an inter partes review “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner,” require that Board to issue a final written decision as to every claim challenged by the petitioner, or does it allow that Board to issue a final written decision with respect to the patentability of only some of the patent claims challenged by the petitioner, as the Federal Circuit held?

Under the current partial institution practice, if a petitioner challenges a claim and the Board determines the challenge was insufficient to support institution, no estoppel attaches for that claim. A decision requiring the Board’s final written decision to determine the validity of all challenged claims would mean that, if review is instituted, the petitioner would be barred from later raising the same invalidity grounds for any challenged claim in court. The Supreme Court’s review of this issue underscores the importance for petitioners to develop strong invalidity grounds for all challenged claims.

A “determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.” 35 U.S.C. § 314(d). A series of decisions from the Federal Circuit have clarified to what extent institution decisions are reviewable. See St. Jude v. Volcano (CAFC lacks jurisdiction to review decision not to institute IPR); In re Dominion Dealer Sols. (denying mandamus petition seeking review of PTAB decision not to institute IPR); In re Cuozzo Speed(CAFC lacks jurisdiction to review institution decision even after a final decision); Versata v. SAP(CAFC has jurisdiction to review whether a patent is a “covered business method patent”); Achates v. Apple (CAFC lacks jurisdiction to review whether petition was time-barred); Synopsys v. Mentor Graphics(declining to review merits of PTAB decision to institute on some grounds but not others, but finding no statutory requirement that the Board address every claim raised in an IPR petition); Harmonic Inc. v. Avid Tech (CAFC lacks jurisdiction to review PTAB decision not to institute review on “redundant” grounds).

The Federal Circuit’s Wi-Fi One v. Broadcom decision clarified that the Federal Circuit’s prior decision that it lacks jurisdiction to review whether a petition is time-barred remains good law after the Supreme Court’s Cuozzo Speed v. Leedecision.

As background, Broadcom petitioned for IPR of the ‘215 patent, challenging numerous claims. Prior to institution, Wi-Fi argued that Broadcom was in privity with entities involved in parallel district court litigation, and that because those entities would be time-barred from seeking IPR of the ‘215 patent, Broadcom was time-barred as well. See35 U.S.C. § 315(b). Wi-Fi filed a motion seeking discovery to support its argument, but after briefing the Board denied the motion. On appeal, Wi-Fi pressed its argument that Broadcom was barred from petitioning for IPR because it was in privity with a time-barred district court litigant. While recognizing that Achates renders its challenge to the Board’s timeliness ruling nonappealable if Achates is still good law, Wi-Fi argued that the Supreme Court’s Cuozzo decision implicitly overruled Achates. As noted by the Federal Circuit, the Cuozzo decision stated that the prohibition against reviewability applies to “questions that are closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review.” The Federal Circuit characterized § 315 as “just such a statute.”

Today, the USPTO published a notice updating the accelerated examination program and noting that the USPTO plans to publish a request for comments to seek public input on whether there is value in retaining the program. Back in 2006, the USPTO introduced the accelerated examination program to allow for expedited prosecution if an applicant performed a pre-examination search and provided various information in an Accelerated Examination Support Document. The accelerated examination program predates the AIA and various rule changes, and this update brings the accelerated examination program up to date.

The accelerated examination program has had relatively low usage since the passage of the AIA. One reason applicants tend to avoid the accelerated examination program is because it requires the applicant to create an extensive record—a record that could create issues in later litigation or post-grant trials. For example, even under the updated requirements, an applicant must identify “where each limitation of the claims finds support under 35 U.S.C. § 112(a) in the written description of the specification” (81 FR 54566, col. 2), “[f]or each reference cited . . . all the limitations in the claims that are disclosed by the reference” (71 FR 36325, col. 1), and “a detailed explanation of how each of the claims are patentable over the references cited” (71 FR 36325, col. 1). Those disclosures in the support document could be cited by an IPR petitioner to support arguments that certain limitations are disclosed in the prior art, or to hold a patent owner to a specific claim construction. Accordingly, the accelerated examination program is rarely used today.

In contrast, the prioritized examination program created by the AIA—typically referred to as “Track 1”—provides for expedited examination without the burdensome search and support document requirements. Track 1 allows an applicant to pay a fee for prioritized examination. While it places some restrictions on expedited applications (e.g., they cannot include more than 30 total claims), it does not risk creating a record that could hurt a patent owner in later litigation or post-grant trials.

In sum, while the update modernizes the program, applicants that use the accelerated examination program risk creating a record that could be used against them in post-grant trials or litigation. In most cases, patent applicants would be better served by taking the “Track 1” route to speed up examination.

Yesterday, the Federal Circuit issued an opinion clarifying that the introduction of new evidence is not only permitted, but “is to be expected,” in inter partes review proceedings. As long as the opposing party is given notice of the evidence and an opportunity to respond to it, the introduction of new evidence is permissible under the Administrative Procedure Act (APA).

As background, the patents challenged in the IPRs on appeal relate to treating Pompe’s disease with injections of a human acid α-glucosidase. The PTAB instituted IPR on various obviousness grounds. After institution, the patent owner argued that, because of all of the combinations of references described in in vivo experiments, a person of ordinary skill in the art would not find those experiments predictive of results in a human patient. The patent owner further argued that because the PTAB did not institute review based on any references that included in vivo data, the petitioner should not be permitted to use any prior art showing successful in vivo tests to demonstrate obviousness. In reply, the petitioner cited to two in vivo studies that related to the relevant enzyme in the in vivo experiments discussed in the prior art references. In its final written decision, the PTAB referred to those in vivo references as support for its findings as to the state of the art. Thus, based on the evidence before it, the PTAB found that by a preponderance of the evidence, the challenged claims would have been obvious.

On appeal, the patent owner argued that the PTAB violated the APA’s requirements of notice and an opportunity to respond by relying in its final written decision on “facts and legal arguments” that were not set forth in the institution decisions. The Federal Circuit disagreed, finding that the PTAB did not “change theories in midstream,” much less deny the patent owner notice of any change. The PTAB’s final written decision found the claims unpatentable on the same grounds as set forth in the institution decision and no others. The Federal Circuit explained that the “development of evidence in the course of the trial is in keeping with the oppositional nature of an inter partes review proceeding.” The Federal Circuit further found that the patent owner received adequate notice of the issues that would be considered, and ultimately resolved, at the hearing. The patent owner itself raised the issue of in vivo studies in its patent owner response. The petitioner then referenced both in vivo references in its reply. And the judges questioned patent owner’s counsel about the in vivo references at the hearing. On this record, the Federal Circuit found that the patent owner had actual notice of the references and an opportunity to respond to them.

This IPR exemplifies that in some cases, a petitioner can benefit from introducing new evidence with its reply to rebut a patentee’s non-obviousness argument. Additional evidence showing the state of the art at the time of the invention may be useful for rebutting a patentee’s argument regarding the knowledge a skilled artisan would bring to bear when reading the prior art identified as producing obviousness. Patent owners should thus be selective in their patent owners’ response and be cautious of including arguments that could be undermined by additional evidence of the state of the art. Additionally, if a petitioner does rely on additional evidence in its reply, a patent owner should consider whether it has grounds to file a motion to exclude the evidence and, if not, consider whether it should seek leave to file a surreply to respond to the new evidence.

Just weeks after its May 2016 memorandum to examiners providing guidance on subject matter eligibility under § 101, yesterday the USPTO issued a new memo updating its guidance to examiners in view of the Federal Circuit’s Enfish decision. As this memo points out, the Enfish decision gave a concrete example of claims directed to improvements in computer-related technology, including claims directed to software, that are not abstract under the first step of the Alice/Mayo analysis. Going forward, it will be important for examiners and applicants to closely analyze the limitations of claims at issue to determine whether the claims are directed to a specific implementation of a solution to a problem in the software arts. If so, they likely satisfy the requirements of § 101 under the Enfish decision.

A Federal Register notice is scheduled to publish tomorrow (pre-publication PDF version is available here) updating the 2014 interim guidance on patent subject matter eligibility and the July 2015 update on subject matter eligibility. Yesterday, a related examiner memorandum published to provide updated examination instructions. Those instructions require examiners to articulate a reasoned rationale for any § 101 rejection under both steps of the Alice/Mayo test. They require an examiner to identify specific claim limitations in support of a rejection under both steps of the two-step analysis. Further, the instructions establish that it is a best practice for examiners to cite appropriate court decisions that support their position. The instructions also establish that if an applicant challenges a rejection but the examiner finds it appropriate to maintain the rejection, a rebuttal must be provided in the next office action. Hopefully, the requirements will lead to more consistent examination with respect to subject matter eligibility. Additionally, if followed these instructions should facilitate creation of a more complete record for appeal where an examiner maintains a subject matter eligibility rejection.

The Federal Circuit’s recent decision in Target Training International v. Extended Disc North America tells the cautionary tale of what can happen to a plaintiff who successfully navigates a post grant challenge by amending claims but does not promptly amend its infringement contentions in parallel litigation.

In this case, Target Training filed an infringement action against Extended Disc in the Southern District of Texas. Per the local rules, Target Training provided preliminary infringement contentions in 2011 alleging infringement of claims 1, 2, and 5-11. The PTO then instituted a reexamination of the asserted patent. The district court litigation was subsequently stayed. Fast forward a few years, and Target Training emerged from the reexamination with original claims 1-11 canceled but with new claims 12-41 confirmed as patentable. The district court reopened the litigation in January 2015. Less than two weeks later, Extended Disc moved for summary judgment of noninfringement and invalidity and, alternatively, moved to dismiss the action as moot because all asserted claims were canceled. A few days later, Target Training filed a notice with the court informing it of the reexamination certificate, stating that thirty new claims were added during the reexamination, and requesting a scheduling conference to discuss, among other things, contentions. The court never responded to Target Training’s request. In June 2015, the court agreed with Extended Disc that Target Training was bound by its preliminary infringement contentions unless it sought leave to amend its contentions. Accordingly, the court granted Extended Disc’s motion to dismiss the case as moot.

The question on appeal was whether it was appropriate for the district court to dismiss the case when Target Training failed to amend its infringement contentions to assert infringement of any of the thirty newly added claims. The Federal Circuit analyzed the record and found that Target Training failed to assert the newly added claims, despite opportunities to do so. Accordingly, it affirmed the district court’s dismissal of the case as moot.

Post grant proceedings are most often used in parallel with litigation, and the lesson here is that practitioners on both sides need to keep strategy for both district court litigation and Patent Office proceedings in mind at all times. Both parties knew when the reexamination was wrapping up, and Extended Disc was ready with both substantive and procedural motions to end the litigation just weeks after the stay was lifted. If Target Training had won the race to the courthouse by moving to supplement its preliminary infringement contentions to assert the new claims as soon as the stay was lifted, it likely could have avoided dismissal.